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Equities are fused with new elements. (innovative equity share issues put together by bankers)


Shares are no longer common or ordinary. They are toys for bankers to tinker with, just as they have tinkered with debt.

The same creative force that possessed the bond market and stipped and sliced instruments, that fused wholly different elements into synthetic concoctions, is now at play in equities. At the same time, equity issuance is climbing, climbing, climbing.

An explosion of Euro-equity hybrids has tested the limits of financial engineering and opened new avenues for raising capital. In the first six months of 1986 the corporate finance departments of banks have packaged more than $13 billion-worth of international equity-linked issues, more than was raised in the whole of 1985.

Along with this boom in equity-related issues comes a belated recognition that the distinction between debt and equity is increasingly artificial. "Equity is just another piece of paper, potentially liquidatable,' said Rupert Watson, an analyst with Greenwell Montagu, the new broking operation of UK merchant banker Samuel Montagu.

Past corporate creativity with stocks has lain in tacking equity features on to debt instruments. Equity has been used as a sweetener to lower the cost of debt; savings of up to 25% in coupons have been achieved.

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